Food Fight

From The Wall Street Journal today:

World Bank President Robert Zoellick warned in a recent speech that 33 countries are at risk of social upheaval because of rising food prices. Those could include Indonesia, Yemen, Ghana, Uzbekistan and the Philippines. In countries where buying food requires half to three-quarters of a poor person's income, "there is no margin for survival," he said.

Global food prices have increased 83% in the last three years. Recently, riots over soaring food prices have broken out in Egypt, Cameroon, Ivory Coast, Haiti, Senegal and Ethiopia. Last week's food riots in Haiti quickly segued into a political mine field.

The diversion of food to biofuels is one source of the rising prices. I touched on this in my previous blog post Black Gold, but it's worth repeating how these renewable fuels will result in higher food prices around the world:

When the production of corn intended for human or animal consumption decreases, prices go up. Why does this local shift in policy affect food prices around the world? The diversion of American corn into energy has a ripple effect for two reasons: First, the United States is the world's largest corn exporter, accounting for about 40 percent of global trade, so when corn-as-food production decreases here, costs go up everywhere. Second, when the price of corn increases, farmers in the United States, Europe, and elsewhere who use the crop to feed livestock look for cheaper alternatives, like wheat or sorghum. These alternatives, in turn, become more expensive.

Another source of rising food prices is global warming. From The Toronto Star: "Climate change is also making its toxic contribution. Major droughts have hit wheat-producing nations such as Australia and Ukraine, leading to a 30-year low in the world's wheat inventories."

A third reason for higher food prices is that fast-developing nations in Asia are demanding more and better food.

The U.S. is not immune to rising food costs. In the last year, milk prices are up by 26%, eggs by 24%, and bread by 13%. And yes, there is hunger in America. Our government estimates that 28 million people will be using food stamps this year. This is the highest level since the program began in the 1960's. Meanwhile, our federal farm program pays $1.3 billion to people who don't farm.

I predict we'll be hearing less and less about the so-called obesity epidemic.

Black Gold

Black gold in a white plight
Wont you fill up the tank, let's go for a ride
--Soul Asylum

What would you think if you woke up early one suburban morning to the rumble of an oil rig outside your window? This is happening all around Los Angeles, and many homeowners are shocked and angry about the revitalization of urban oil wells:

With oil prices at $110 a barrel, producers nationwide are suddenly taking a second look at decades-old wells that were considered tapped out and unprofitable when oil sold for one-fifth the price or less. Independent producers and major conglomerates alike are reinvesting millions in these mature wells, using expensive new technology and drilling techniques to eke every last drop out of fields long past their prime - and often in the middle of suburbia.

Expansion of the North American oil refining capacity might be one answer to our ailing economy. Besides siphoning out these old wells, there is also an estimated 174 billion barrels of crude oil in Canadian tar sands.

But extracting heavy oil from tar sands and transporting it by pipeline for refining is a difficult and costly process. Producers are developing new drilling techniques to reduce the large volumes of natural gas and water needed to separate the oil from sand. And the oil companies, which have pledged to reduce greenhouse emissions in their operations, are making the needed investments to meet environmental regulations.

And let's not forget about the Arctic National Wildlife Refuge (ANWR). According to American cartographer Ian Thomas, we may already be drilling there.

These are epic battles. Naively, I'd like to believe that these battles are fought between people who are concerned about the environment and global warming and people who are concerned about our fuel costs and energy independence. I want to believe that both sides have noble goals. However, defending profits of a subsidized industry does not fit my definition of noble.

The oil companies can keep drilling, and get every last drop of oil, but with the world petroleum consumption over 80 million barrels a day, we will eventually run dry. We need to work on a sustainable plan now.

I hear a lot of talk lately about biofuels. By 2010, 30% of US corn crop will be used for biofuel, but this renewable fuel will result in higher food prices around the world:

When the production of corn intended for human or animal consumption decreases, prices go up. Why does this local shift in policy affect food prices around the world? The diversion of American corn into energy has a ripple effect for two reasons: First, the United States is the world's largest corn exporter, accounting for about 40 percent of global trade, so when corn-as-food production decreases here, costs go up everywhere. Second, when the price of corn increases, farmers in the United States, Europe, and elsewhere who use the crop to feed livestock look for cheaper alternatives, like wheat or sorghum. These alternatives, in turn, become more expensive.

Americans need to remember that it's not all about us. The rest of the world likes to eat too.

Saying this oil crisis is complicated is an understatement. It is urgent, it is real, it is moral, it is global, it is challenging, but it is not black and white.